CITIC SECURITIES released a research report stating that passive funds saw significant outflows in January. It is estimated that in the past week (January 26-30, 2026, same below) and throughout January, 11 bank-related ETFs recorded net outflows of 377.3 billion yuan and 910.2 billion yuan, respectively. This impacted bank stocks with net capital outflows of approximately 48.5 billion yuan and 105.1 billion yuan (estimated values), leading to a sector decline of 6.1% year-to-date. Currently, the sector's dividend yield stands at 4.4%, rising into a high-value range. Last week marked the single week with the largest capital outflow, yet the bank index rose by 1%, implying a significant increase in allocation willingness among long-term institutional investors. Looking ahead to 2026, strong first-quarter credit issuance and a favorable operating environment for banks are expected, with stable net interest margin and asset quality expectations, alongside recovering revenue and profit growth, which will solidify the value of core equity assets. CITIC Securities' main views are as follows:

The peak of capital outflows for the sector has passed, and its allocation value is beginning to emerge. 1) Passive funds concentrated their outflows in January, clearing阶段性 pressure, with limited room for subsequent impact. The firm estimates that last week and in January, 11 bank-related index-linked ETFs, including the CSI 300, SSE 50, and CSI Bank indexes, saw net outflows of 377.3 billion yuan and 910.2 billion yuan, respectively. This corresponded to an estimated impact of net capital outflows from bank stocks of about 48.5 billion yuan and 105.1 billion yuan (estimates may deviate from actual figures). Specifically, the shares of the CSI 300 and SSE 50 ETFs fell by 48% and 53% in January, respectively, indicating that the pressure from passive fund reductions has been largely released, leaving relatively limited room for further impact. 2) Valuation and yield advantages are reappearing, and market stabilization enhances allocation attractiveness. Last week was the single week with the largest net outflow from related ETFs in January, yet the CITIC Bank Stock Index (CI005021.WI) still recorded a gain of +0.87%, implying that institutional investors have begun actively positioning. In January, the CITIC Bank Stock Index (CI005021.WI) experienced a significant pullback, but the sector's market-cap-weighted dividend yield increased by approximately 40 bps from the beginning of the year to around 4.4%. The dividend yields of some large-cap blue-chip stocks rebounded to above 5%, entering a high-value range.

Last week, two city commercial banks released their preliminary earnings reports, demonstrating operational resilience. Last week, two city commercial banks (Qingdao Bank, Xiamen Bank) disclosed their 2025 preliminary earnings reports. The data shows: 1) Performance maintained growth, with profit growth accelerating. Qingdao Bank's revenue/net profit attributable to parent company shareholders increased by +7.97%/+21.66% respectively, with full-year profit growth accelerating further compared to Q1-Q3 (+15.54%). Xiamen Bank's revenue/net profit attributable to parent company shareholders increased by +1.69%/+1.52% respectively, with full-year profit growth recovering compared to Q1-Q3 (+0.73%). 2) Robust expansion of loans and deposits. In 2025, Qingdao Bank's loans/deposits increased by +16.53%/+16.41% respectively; Xiamen Bank's loans/deposits increased by +18.39%/+13.75% respectively. 3) Asset quality remained excellent, with overall sufficient risk resistance capacity. At the end of 2025, Qingdao Bank's non-performing loan ratio was 0.97%, significantly improved from the beginning of the year (-0.17 ppts), and its provision coverage ratio increased substantially by 51 ppts to 292.30%. Xiamen Bank's NPL ratio was 0.77%, with a provision coverage ratio of 312.63%.

Banks are expected to have active credit issuance in the first quarter's "good start," with a stable full-year operating landscape. The firm believes that banks will continue their strategy of "early placement, early收益" in the first quarter, promoting a strong start through front-loaded assessments and project reserves. The firm expects new credit issuance to be comparable to the same period last year: 1) Corporate lending remains the main engine of credit growth. Structurally, corporate lending is expected to be the primary source of incremental growth, focusing on infrastructure, advanced manufacturing, technology finance, and policy-supported industries. Retail growth remains relatively weak but is expected to stabilize with adjustments in products and customer segments. 2) Stable net interest margin expectations. Affected by declining yields on the asset side, net interest margins are still on a downward trend. However, supported by liability cost control and optimization of the asset structure, the pace of decline is expected to slow and gradually stabilize. 3) Revenue growth is expected to be better than the previous year. The firm anticipates continued improvement in net interest income and revenue growth, with profits maintaining steady growth supported by overall stable asset quality.

Risk factors: A significant slowdown in macroeconomic growth; worse-than-expected deterioration in bank asset quality; unexpected changes in regulatory policies.